The shares of shipping sultan Euroseas Ltd. (ESEA: sentiment, chart, options) have surged more than 8% higher today, rallying on the heels of a duo of headlines.
First, after the close of trading yesterday, the Greece-based company announced that it inked an agreement to sell 1 of its dry bulk vessels for approximately $3.85 million. The new owners are expecting the ship to be delivered sometime in January.
Second, Euroseas revealed that it has extended the charters of 2 of its containerships. The extensions – 1 for an additional year, the other for an extra 6 months – come with a charter reduction to $12,000 from $18,500, and $16,500 to $11,000, respectively.
The company also stated that following the aforementioned sale and extensions, approximately 50% of its total fleet days of 2009, and about 27% in 2010, will be fixed under period charters, already concluded spot charters, FFA contracts, or otherwise protected from market fluctuations.
Today, the shares of ESEA have added more than 30 cents to hover near the 4.35 level. However, the security's voyage into the black is approaching a proverbial iceberg in the form of its 10-week moving average. The equity has managed only 1 weekly close atop this trendline since late August, before ESEA perforated long-term support at the round-number 10 level.
Regardless of losing roughly 67% in 2008, some analysts remain smitten with ESEA. The equity still harbors 2 "strong buys," compared to an equal number of "holds," according to data from Zacks.
In addition, the security's average 12-month price target rests at $6.50, as reported by Thomson Financial. In order to achieve this somewhat generous goal – in a neighborhood the stock hasn't closed a session above since early October – the shares of ESEA would need to sail almost 50% higher from their current trading range.
Meanwhile, in parity with the high hopes among the brokerage bunch is the optimism among options players. The dry bulk issue's Schaeffer's put/call open interest ratio (SOIR) has snowballed lower during the past couple of months, and now rests at 0.47, implying that calls more than double their pessimistic rivals among options with less than 3 months until expiration. Furthermore, this reading ranks in the 29th annual percentile, indicating that short-term options speculators have been more bullishly aligned toward ESEA less than a third of the time during the past year.
In conclusion, should the stock's 10-week moving average smack the shares lower once again, the lingering optimists could abandon ship. A continuation of ESEA's recent technical woes could frighten the bulls in both the analyst community and the options pits. A fresh round of downgrades and/or price-target cuts, or a reversal in sentiment among options players, could further exacerbate the equity's recent trouble on the charts.
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